Interactive Brokers Group Announces 1Q2021 Results

Rhea-AI Summary

Interactive Brokers Group reported a strong financial performance for Q1 2021, with diluted earnings per share of $1.16, up from $0.60 in Q1 2020. Net revenues reached $893 million, a significant increase from $532 million the previous year. Commission revenue grew 53% to $413 million, driven by higher trading volumes, while net interest income rose 19% to $49 million. The company declared a quarterly dividend of $0.10 per share, payable on June 14, 2021. Customer accounts increased 74% to 1.33 million, and customer equity grew 106% to $330.6 billion, reflecting strong growth in the trading environment.

Positive

• Diluted earnings per share increased to $1.16 from $0.60 YoY.
• Net revenues rose to $893 million, up from $532 million YoY.
• Commission revenue grew by $143 million, or 53%, due to higher customer trading volumes.
• Net interest income increased by $49 million, or 19%, on strong securities lending activity.
• Customer accounts increased 74% to 1.33 million.
• Customer equity grew 106% to $330.6 billion.

Negative

• General and administrative expenses rose by $22 million, impacting profitability.

Interactive Brokers Group, Inc. (Nasdaq: IBKR), an automated global electronic broker, reported diluted earnings per share of $1.16 for the quarter ended March 31, 2021 compared to $0.60 for the same period in 2020, and adjusted diluted earnings per share of $0.98 for this quarter compared to $0.69 for the year-ago quarter.

Net revenues were $893 million and income before income taxes was $639 million for this quarter, compared to net revenues of $532 million and income before income taxes of $308 million for the same period in 2020. Adjusted net revenues were $796 million and adjusted income before income taxes was $542 million for this quarter, compared to adjusted net revenues of $581 million and adjusted income before income taxes of $357 million for the same period in 2020.

Financial Highlights

• Commission revenue showed strong growth, increasing $143 million, or 53%, from the year-ago quarter on higher customer trading volumes within an active trading environment worldwide.

• Net interest income increased $49 million, or 19%, from the year-ago quarter on strong securities lending activity, tempered by a decrease in the average Federal Funds effective rate to 0.08% from 1.25% in the year-ago quarter, which reduced earnings on segregated customer cash and margin lending.

• Other income increased $151 million from the year-ago quarter. This increase was mainly comprised of $107 million related to our strategic investment in Up Fintech Holding Limited (“Tiger Brokers”), which swung to a $99 million mark-to-market gain this quarter from a $8 million mark-to-market loss in the same period in 2020; and $47 million related to our currency diversification strategy, which lost $2 million this quarter compared to a loss of $49 million in the same period in 2020.

• General and administrative expenses increased $22 million from the year-ago quarter, led by $19 million in additional costs for Brexit-related regulatory onboarding to bring our new brokerage operations on line in Europe.

• 72% pretax profit margin for this quarter, up from 58% in the year-ago quarter. 68% adjusted pretax profit margin for this quarter, up from 61% in the year-ago quarter.

• Total equity of $9.4 billion.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on June 14, 2021 to shareholders of record as of June 1, 2021.

Business Highlights

• Customer accounts increased 74% from the year-ago quarter to 1.33 million.
• Customer equity grew 106% from the year-ago quarter to $330.6 billion.
• Total DARTs² increased 128% from the year-ago quarter to 3.31 million.
• Cleared DARTs increased 128% from the year-ago quarter to 2.96 million.
• Customer credits increased 30% from the year-ago quarter to $84.5 billion.
• Customer margin loans increased 113% from the year-ago quarter to $42.2 billion.

COVID-19 Pandemic

In March 2020, the World Health Organization recognized the outbreak of Coronavirus Disease 2019 (COVID-19) caused by a novel strain of the coronavirus as a pandemic. The pandemic affects all countries in which we operate. The response of governments and societies to the COVID-19 pandemic, which includes temporary closures of certain businesses; social distancing; travel restrictions, “shelter in place” and other governmental regulations; and reduced consumer spending due to job losses, has significantly impacted market volatility and general economic conditions.

The COVID-19 pandemic has precipitated unprecedented market conditions with equally unprecedented social and community challenges. Amid these challenges:

• The Company is committed to ensuring the highest levels of service to its customers so they can effectively manage their assets, portfolios and risks. The Company’s technical infrastructure has withstood the challenges presented by the extraordinary volatility and increased market volume.

• The Company can run its business from alternate office locations and/or remotely if a Company office must temporarily close due to the spread of the COVID-19 pandemic.

The initial effects of the COVID-19 pandemic on the Company’s financial results, which may have continued through the first quarter of 2021, can be summarized as follows: (1) higher commission revenue due to increased trading activity and a higher rate of customer accounts opened throughout 2020 and into the first quarter of 2021; and (2) lower net interest income resulting from lower benchmark interest rates. Reduced net interest income on customer cash balances and margin lending was offset in the current quarter by a strong performance in securities lending.

The impact of the COVID-19 pandemic on the Company’s future financial results remains uncertain and currently cannot be quantified, as it depends on numerous evolving factors that currently cannot be accurately predicted, including, but not limited to the duration and spread of the pandemic; its impact on our customers, employees and vendors; governmental actions in response to the pandemic; and the overall impact of the pandemic in the economy and society; among other factors. Any of these events could have a materially adverse effect on the Company’s financial results.

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1 See the reconciliation of non-GAAP financial measures starting on page 10.

2 Daily average revenue trades (DARTs) are based on customer orders.

Effects of Foreign Currency Diversification

In connection with our currency diversification strategy, we base our net worth in GLOBALs, a basket of 10 major currencies in which we hold our equity. In this quarter, our currency diversification strategy decreased our comprehensive earnings by $78 million, as the U.S. dollar value of the GLOBAL decreased by approximately 0.84%. The effects of the currency diversification strategy are reported as components of (1) Other Income (loss of $2 million) and (2) Other Comprehensive Income (loss of $76 million).

Conference Call Information:

Interactive Brokers Group, Inc. will hold a conference call with investors today, April 20, 2021, at 4:30 p.m. ET to discuss its quarterly results. Investors who would like to listen to the conference call live should dial 877-324-1965 (U.S. domestic) and 631-291-4512 (international). The number should be dialed approximately ten minutes prior to the start of the conference call. Ask for the “Interactive Brokers Conference Call.”

The conference call will also be accessible simultaneously, and through replays, as an audio webcast through the Investor Relations section of the Interactive Brokers web site, www.interactivebrokers.com/ir.

About Interactive Brokers Group, Inc.:

Interactive Brokers Group affiliates provide automated trade execution and custody of securities, commodities and foreign exchange around the clock on over 135 markets in numerous countries and currencies, from a single IBKR Integrated Investment Account to clients worldwide. We service individual investors, hedge funds, proprietary trading groups, financial advisors and introducing brokers. Our four decades of focus on technology and automation has enabled us to equip our clients with a uniquely sophisticated platform to manage their investment portfolios. We strive to provide our clients with advantageous execution prices and trading, risk and portfolio management tools, research facilities and investment products, all at low or no cost, positioning them to achieve superior returns on investments. Barron’s ranked Interactive Brokers #1 with 5 out of 5 stars in its February 26, 2021, Best Online Broker Review.

Cautionary Note Regarding Forward-Looking Statements:

The foregoing information contains certain forward-looking statements that reflect the Company’s current views with respect to certain current and future events and financial performance. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the Company’s operations and business environment which may cause the Company’s actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. Any forward-looking statements in this release are based upon information available to the Company on the date of this release. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could potentially affect the Company’s financial results may be found in the Company’s filings with the Securities and Exchange Commission.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES OPERATING DATA
TRADE VOLUMES:
(in 000's, except %)
		Cleared				Non-Cleared												Avg. Trades
		Customer		%		Customer		%		Principal		%		Total		%		per U.S.
Period		Trades		Change		Trades		Change		Trades		Change		Trades		Change		Trading Day
2018		328,099				21,880				18,663				368,642				1,478
2019		302,289		(8%)		26,346		20%		17,136		(8%)		345,771		(6%)		1,380
2020		620,405		105%		56,834		116%		27,039		58%		704,278		104%		2,795
1Q2020		128,564				11,373				4,879				144,816				2,336
1Q2021		273,985		113%		24,079		112%		8,418		73%		306,482		112%		5,024
4Q2020		178,614				17,008				7,455				203,077				3,223
1Q2021		273,985		53%		24,079		42%		8,418		13%		306,482		51%		5,024

CONTRACT AND SHARE VOLUMES:
(in 000's, except %)
TOTAL		Options		%		Futures1		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2018		408,406				151,762				210,257,186
2019		390,739		(4%)		128,770		(15%)		176,752,967		(16%)
2020		624,035		60%		167,078		30%		338,513,068		92%
1Q2020		138,206				49,204				62,298,036
1Q2021		231,797		68%		40,868		(17%)		308,934,824		396%
4Q2020		170,191				35,295				121,062,599
1Q2021		231,797		36%		40,868		16%		308,934,824		155%
ALL CUSTOMERS		Options		%		Futures1		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2018		358,852				148,485				198,909,375
2019		349,287		(3%)		126,363		(15%)		167,826,490		(16%)
2020		584,195		67%		164,555		30%		331,263,604		97%
1Q2020		128,842				48,437				59,897,045
1Q2021		221,898		72%		40,361		(17%)		306,165,385		411%
4Q2020		160,953				34,851				119,654,910
1Q2021		221,898		38%		40,361		16%		306,165,385		156%
CLEARED CUSTOMERS		Options		%		Futures1		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2018		313,795				146,806				194,012,882
2019		302,068		(4%)		125,225		(15%)		163,030,500		(16%)
2020		518,965		72%		163,101		30%		320,376,365		97%
1Q2020		112,916				47,979				57,653,853
1Q2021		202,583

FAQ

What are the Q1 2021 earnings per share for IBKR?

The diluted earnings per share for Interactive Brokers Group in Q1 2021 was $1.16.

How did IBKR's net revenues perform in Q1 2021?

In Q1 2021, Interactive Brokers Group reported net revenues of $893 million, compared to $532 million in the same quarter of 2020.

What was the dividend declared by IBKR in Q1 2021?

The Board of Directors declared a quarterly cash dividend of $0.10 per share, payable on June 14, 2021.

How many customer accounts did IBKR have in Q1 2021?

Interactive Brokers Group had 1.33 million customer accounts as of Q1 2021, an increase of 74% year-over-year.

What drove the increase in commission revenue for IBKR in Q1 2021?

The commission revenue increased due to higher customer trading volumes, reflecting an active trading environment.